In the past few months, the industry has seen a significant shakeup among many of our top policy decision-makers and influencers. From David Stevens stepping down after a very successful tenure as head of the MBA to the confirmation of Kathleen Kraninger as the head of the CFPB (yes, I know it is now BCFP... /eyeroll) to Mark Calabria, potential candidate in line to replace Mel Watt at FHFA. As a result of the mid-terms, Maxine Waters will take over the House Financial Services committee. Oh yes... this is going to be a interesting ride.
David Stevens Mr. Stevens has become Bosley for the industry, opining regularly with sage and knowing advice about the mission at hand. He sounds like he is having fun telling it like it is. To understand how far David has amplified the voice of the MBA and the respect he garners on the Hill, "Stevens also cited Department of Housing and Urban Development Ben Carson’s recent congressional testimony, when he was asked how HUD and the Department of Justice’s use of the False Claims Act to go after FHA lenders. In that testimony, Rep. Dave Trott, R-Michigan, read directly from Stevens’ HousingWire opinion piece from July on the False Claims Act." (HousingWire)
Maxine Waters As the Credit Union Journal reported, Waters “is expected to waste no time aggressively scrutinizing the agency [CFPB]… Observers expect her to use the committee’s subpoena powers to investigate how decisions were made by Mulvaney, including an 80% drop in enforcement actions in 2018, to just nine, from 47 a year earlier.”
Additionally, GSE reform is at the top of her list. That will be an interesting negotiation. Fannie and Freddie required $191B in bailout and have since returned $286B in dividends to the Treasury. It will take some serious political will to return those profits back to the private sector.
Mike Mulvaney Mulvaney was very clear his work at the CFPB was focused on reversing many of Cordray's decisions. One of his primary goals was to transition the agency from a "regulation by enforcement" or the "we'll let you know when you are doing it wrong via consent order and a whopper of a fine" approach. The industry needs to find a balance between arbitrary, punitive regulation and the wild west.
Unfortunatley one legacy may be the name-change... BCFP? Why is this change so hard for me to get my head around? And based on an internal agency report it will cost $9-19MM for rebranding? Not to mention potentially $100MMs for the industry as a whole... this is a very disappointing development for the responsible use of taxpayer dollars.
Kathleen Kraninger Kraninger will likely continue in Mulvaney's current course... making policy changes and revisions in line with a conservative agenda. Mulvaney was her boss at the OMB, and she has committed "under my stewardship, the bureau will take aggressive action against bad actors who break the rules by engaging in fraud and other illegal activity." In National Mortgage News today she was quoted: "regulation by enforcement is certainly pushing the envelope as members saw it, as I saw it,” she said. “And I think there is a responsibility here to make sure that the law is clearly articulated in the regulations and that that is what the bureau is enforcing."
Mike Calabria Currently serving as the economist for Mike Pence, Calabria has years of work on the Hill under his belt. Having worked as Senior Professional Staff on the Senate Banking Committee through 2009, he saw the crisis up close and personal. With another 8 years at Cato, he has spent a lot of academic time thinking about financial regulation within the Beltway. All signs point to his being very interested in GSE reform... the private market version. Unlike Mel Watt, he has made it very clear FHFA should be in charge and priority one is insulating the taxpayer from future losses.
Calabria wrote "this means the future of the GSEs — and any credible prospect of reducing their risk to the taxpayer — lie almost exclusively in the hands of their regulator: the Federal Housing Finance Agency. While the focus in the GSE debate has mostly been on Congress, the FHFA does have viable de-risking tools at its disposal. The agency should not delay in using them." (American Banker Jan 26, 2016)
Will Calabria's ideology hold out in the force of some serious political headwinds? Maybe it will be a good time to revisit the invisible tax on homeownership from Fannie and Freddie, aka the g-fee... Those juicy g-fees that aren't even recognized as a tax. Compromise will come from somewhere - but Ceasar is going to want to get PAID. Then the challenge of how to recruit investors when their main competitor is the United States government. Enter the cold reality of rising interest rates and a $21T national debt, unaffordable housing markets, sluggish income growth, potential trade wars, and global instability... all I am saying is the yield curve inverted... and that is historically doubleplusungood.
